Rewritten wine law sparks debate - East Valley Tribune: News

Rewritten wine law sparks debate

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Posted: Sunday, September 17, 2006 6:36 am

An Arizona law on interstate shipment of wine is going to be challenged in court shortly after it takes effect Thursday. James Tanford, an attorney for some Arizona wine lovers and an out-of-state winery, acknowledged that legislators recrafted the old law after a U.S. Supreme Court ruling that found it and similar laws elsewhere unconstitutional.

And, on the surface, it would seem to address the problems found by the high court.

But Tanford said the new statute is no more constitutional than the one it replaces.

He will get a fight from Leesa Berens Morrison, director of the Arizona Department of Liquor Licenses and Control. She said the new law eliminates the practices that illegally discriminated against out-of-state wineries.

Tanford, however, said he is asking U.S. District Court Judge Mary Murguia to look beyond the actual words of the statute and to examine its practical effects. If she does, Tanford said, she will declare it unconstitutional.

Such a ruling would not disappoint at least one legislator.

Sen. Barbara Leff, RParadise Valley, said she sees no reason to throw roadblocks in the path of Arizonans who want to order wines that are not generally available directly from local retailers. She said the only reason the law wound up the way it did is because the distributors did not want to lose business.

Arizona law for years has revolved around a three-tiered system: Manufacturers sell only to wholesalers; retailers can buy only from wholesalers.

A 1982 law designed to help the state’s nascent wine industry created an exception: Arizona wineries producing less than 75,000 gallons a year could sell directly to consumers.

More to the point, they also could ship directly to both retailers and consumers, bypassing the wholesalers.

The idea was that many wholesalers would not bother with the Arizona wines.

All went well until the U.S. Supreme Court last year voided similar laws in other states.

The justices concluded that special privileges granted by legislators to only that state’s wineries violates the Commerce Clause of the U.S. Constitution.

That led to a pitched battle at the state Capitol, with some wholesalers pushing to scrap the exemption entirely.

They said direct shipments to consumers makes it easier for underage drinkers to get alcohol.

And they questioned whether the state would be cheated out of its taxes on alcoholic beverages.

In the end, the key provision of the new law that takes effect Thursday allows any winery, anywhere, that produces less than 20,000 gallons a year to ship directly to customers and retailers in Arizona.

“Within a few days thereafter, we will file an amended complaint that addresses the new statute,’’ Tanford told Capitol Media Services.

“That will sort of start things over again.’’

Tanford, a professor at the Indiana University College of Law, specifically mentioned that 20,000 gallon figure.

“Not by coincidence, every Arizona winery but one produces fewer than 20,000 gallons,’’ Tanford said.

And that last winery, he said, apparently didn’t care if it kept the direct shipment privilege.

The net result, he said, is nothing changes for virtually every Arizona winery. But it continues to exclude 90 percent of out-of-state wineries.

“It is overtly discriminatory,’’ Tanford said.

He said the fact that the law does not, on its face, give special privileges to in-state wineries does not protect it from challenges.

“The law requires the court to look beneath the surface of a law and ask the question whether a law has the practical effect . . . of discriminating against out-ofstate business entities and giving favorable treatment to in-state entities,’’ he said.

Beyond that, Tanford said there is no legitimate justification to have disparate treatment between small and large wineries.

“If you’re concerned about shipments to minors, what difference does the size of the winery make?’’ he asked.

“If you’re concerned about everybody paying their taxes, what difference does the size of the winery make?’’

He said about the only thing a gallonage limit does is protect the in-state wholesalers, ensuring they have exclusive rights to distribute the “big wine labels.’’

And that, said Tanford, also is impermissible economic protectionism.

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